Tuesday, August 27, 2013

If the take-away is that big companies can sometimes lose track of how to compete effectively with smaller, nimbler, more innovative successors, there's nothing new to that story - it bears repeating, it's something companies should try to remember as they get big, and it's something most companies seem to forget given enough time, success, and/or an unfortunate choice of leadership. Paul Krugman argues that Apple could follow Microsoft into decline, and that it's situation could potentially be worse as it sells consumer products and thus isn't as insulated from market forces as Microsoft, which benefits from having lazy IT departments refuse to support Apple products. But that makes Apple more like Hewlett-Packard, a once great and innovative company that produced quality products, then lost its way under incompetent, bean-counting management that slashed its research budget and didn't care about quality. For that matter, you could compare the future theoretical decline of Apple to the past, actual decline of Apple, where bad decisions by Steve Jobs and his successor all-but-destroyed the company before Steve Jobs returned from NeXT with a much improved vision for the company. But for Apple's reinvention of itself, odds are that we wouldn't be fretting over whether the next iPhone will be only incrementally improved over the prior model and that Android would still be a Blackberry clone. Let's recall, Apple's big profits come not from software, but from hardware.

Krugman writes,

The story of how that state of affairs arose is tangled, but I don’t think it’s too unfair to say that Apple mistakenly believed that ordinary buyers would value its superior quality as much as its own people did. So it charged premium prices, and by the time it realized how many people were choosing cheaper machines that weren’t insanely great but did the job, Microsoft’s dominance was locked in.

On the contrary, I think Apple is painfully aware of the fact that many consumers, particularly those at the low end of the market, are choosing Android devices. Although Apple still suffers more than a bit from the Steve Jobs attitude of, "We know what you want better than you do" (an attitude Krugman notes in a blog entry on the subject) - and in fairness to Steve Jobs, at least during his second tenure at Apple he was often correct - they don't market their most profitable products in the manner that Krugman suggests. They're not trying to convince you to buy a $599 iPhone versus a bottom-of-the-market $100 Android phone. They're trying to get you to sign up for a two year contract with your phone carrier, with much of the purchase price being built into your service contract and your nominal purchase price being not much different from a low-end phone.

In terms of quality and pricing, for quite some time Apple's computers have stacked up quite well, feature-for-feature, with the diminishing pool of well-constructed PC's. But it has been my impression from the lack of development of their desktop market that they aren't interested in trying to make a huge - or even a modest - push for market share within that diminishing market. Not surprisingly, they like to manufacture products that are profitable, something that very few cell phone manufacturers do. They and Samsung presently sell cellular phones at a profit. Thanks to the increased quality of competing products, I suspect that Samsung will soon find itself facing a commoditized market for higher-end cell phones and Apple will be the last cell phone company that makes a significant profit from its hardware. Then, barring the unlikely event that we get something as disruptive to the industry as another iPhone, Apple will no longer be able to sell its cell phones for an appreciable premium over the commodity price - and the entire industry will have to glean its profits elsewhere. Apple is trying to establish a reliable ecosystem - hardware and software that work well together, allow most products that remain in service to be upgradable to the current operating system, and are easy and reliable platforms upon which third party software and hardware developers can manufacture apps and iOS-compatible products. Despite Android's quality, the fragmentation of its operating system and the fact that many phone manufacturers don't care if a two-year-old handset can be upgraded will impair its ability to offer the same opportunities. Apple intends to make money, even in a commoditized market, from app sales and licensing fees.

Krugman appears to be focusing on major disruption rather than modest innovation, even as he brings Yahoo! and Marisa Mayer into the discussion. If the resurgence of Yahoo! is a story to be believed... and I'm a skeptic... its resurgence will be the result of improvements at the margins. And that story would not be atypical. The biggest fortunes tend to be made not by the person who comes up with a concept or invents the early version, but with the person who comes up with an upgraded version of the product - something that ships better, something that's easier to manufacture, something that's easier to use. When Steve Jobs saw early versions of a window-based operating system and mouse at HP's then-famous labs, he saw the potential to transform them and turn them into products for a mass market. Jobs wasn't the inventor of the cell phone, display panel or touch screen - but he and his company came up with an innovative way to combine them.

Microsoft committed some odd, oversized errors over the past couple of decades that have contributed to its downward slide. As Krugman notes, they didn't see the potential of the iPhone, but more than that they didn't see the potential of the Internet. As Krugman noted, a lot of Microsoft's past success was built on its monopoly power, but its best and most profitable products were not major innovations. Windows built upon work that Microsoft performed for Apple, in developing the operating system for the Macintosh. It's office suite built upon software products that offered similar functionality, perhaps with modest improvement (but often without, or with 'innovative' features that you couldn't wait to turn off), and became dominant through bundling. Its browser became dominant through bundling, leading to the decline of Netscape, but it lost interest in developing a cutting edge browser pretty much the moment it no longer perceived Netscape as a threat.

Contrary to Krugman's inferences, having never been a user of Apple products, Apple did not always have a quality advantage over Microsoft or its associated hardware developers. Windows 95 incorporated some features that it took Apple years to emulate, and after Jobs left Apple's hardware quality plummeted. For that matter, for all of its innovative features, the early Macintosh suffered from having too few programs and too little RAM, as well as the odd design compromises that came from Steve Jobs' disdain for internal fans. Microsoft's present plight emerges from its failure to effectively enter new markets as the old ones faded - as operating systems became "good enough" that companies felt no need to upgrade every year or two, and as its Office suite became "good enough" that any changes it made from year-to-year were not likely to bring new sales, and as its customers tired of its game of modifying Word files such that you had to jump through hoops to save a document that would open on an older version of its software. In that sense we're back to the legitimate fear for Apple as a hardware company - that unless it comes up with a remarkable hardware innovation it's looking at a future where its products are commoditized and while, despite some people sticking with the company due to their library of iOS apps, many customers come to see little reason not to change platforms. Apple is trying to look beyond that day, and Google is struggling to convince Android developers to follow standards that will allow it to keep up.

Apple's biggest problems seem to come from copyright law, and entrenched monopolies and oligopolies. It is having difficulty coming up with a television product because of the difficulty of licensing content from media companies. Its products rely on Internet bandwidth, with many customers obtaining that bandwidth from cable monopolies. The iPhone demonstrated how you can create a breakthrough, profitable product in a tired, commoditized market, but without content there's no apparent room for a similar move in television. Also, most televisions these days would qualify as reasonably powerful computers, so it's not clear that Apple could offer a disruptive product that would not quickly be emulated, perhaps less artfully, by its competitors. People talk about an iWatch, and I think it is inevitable that Apple will produce a wearable device of some sort... although I don't think it is likely to be a watch in the sense that we have traditionally used that word, either in how it's worn or what it does, but all we can do at this point is speculate.

Google is, in a sense, playing Microsoft to Apple's iOS, offering a version of highly similar software for free, Microsoft Internet Exploder vs. Netscape's browser. I sometimes wonder if Google will continue to provide free operating system development for the world, or at least if it will be as quick to make its greatest innovations part of the core as opposed to part of a proprietary add-on, particularly as it attempts to spin Motorola up into a dominant manufacturer of Android phones. As with all of this stuff, time will tell.

Monday, August 26, 2013

Jennifer Rubin, who people say is smart but who nonetheless rattles off a predictable set of talking points and often makes hare-brained assertions, comments on Ted Cruz,

Smarts don’t always equate to common sense. In the case of Sen. Ted Cruz (R-Tex.), there is an inverse relationship between the two. I’m told by smart lawyers that he has a sharp legal mind, can think on his feet and has remarkable recall for facts, cases and even page numbers of the briefs. But his political judgment has become distorted by ambition.

Hm...

Her illustration of Cruz's 'smarts' reminds me of an anecdote about a lawyer who was similarly famed for his ability to provide pinpoint citations, on his feet, in court. Somebody asked him, eventually, how he managed to recall cases and even page numbers with such specificity. "I make them up. Nobody ever checks." But with a bit less cynicism, having a good memory - even an eidetic memory - is proof of good memory, not intelligence. Cruz may well be as smart as some people say, or he may be smart in the same sense that Newt Gingrich and Paul Ryan are touted as intellectual giants among their Republican peers. When the pond is that shallow, you don't need to be a particularly big fish to stand out - and sometimes all it takes is for you to be the one people see because it's sticking its head out of the pond with its mouth constantly open. I'm also reminded of a certain trial lawyer who once ran for President, who strikes me as having been deemed a great trial lawyer by virtue of having a well-rehearsed presentation of a particular type of big money case, and who retired into politics when that particular line of litigation dried up. Or a certain TV host who brags about her conviction rate for homicide prosecutions, never mind that homicide cases are often open-and-shut with defendants going to trial only because they have nothing to lose. You have to look beyond the surface to find out if somebody truly is as brilliant as he and his friends claim him to be.

Rubin notes that Cruz was spouting nonsense about how Mitt Romney was the greatest guy in the world before he lost, at which point she contradicted her prior claims about him and denounced his deep flaws without appearing to notice the contradiction. No, wait, that was Rubin. She notes that Cruz is pretending that the President might sign a bill defunding the PPACA/Obamacare, and purporting that the public won't blame the Republicans if they shut down the government.

Well, maybe he understands something else. Perhaps he is as smart as his admirers claim and he is wildly ambitious, hoping to draw attention and fundraising dollars for his windmill-tilting scam. Later in the CNN interview he made it clear he was playing to the base on this one... And who better to pull the tsunami to shore than Cruz, right? Send money! Come to his events! Become outraged when the “unprincipled” Republicans won’t support him!

Read his blog! Oh, wait...

Cruz is emblematic of a group of conservative hucksters peddling outrage and paranoia who contend that the strength of the political resistance they generate is equivalent to their own importance, and that one dramatic, losing standoff after another is the pinnacle of political success. Alas, they confuse their own fame with achievement and divisiveness with progress.

And if that doesn't work out for him in politics, maybe Fred Hiatt can give him a job?

Rubin suggests that Cruz would be better off following the lead of Speaker Boehner, and "trying to put the monkey on the Democrats’ backs (as the speaker of the House is doing) in the Obamacare fight". Nobody has ever accused Boehner of being a genius, but perhaps Rubin should take note of the fact that pretty much every aspect of Obamacare is popular, save for the mandate which is a necessary part of the popular provision that requires insurance companies to provide coverage without respect to preexisting conditions. Pushing a fantasy about defunding Obamacare is probably more sensible than crossing your fingers and hoping that the mandate proves so unpopular that people are willing to throw the baby out with a few inches of bathwater.

A political loner and man of rhetoric, not of action or achievement, he bears a striking resemblance to the current Oval Office resident. Each considers himself the smartest man in any room (inducing annoyance and resentment among his party members) and each fails to understand rhetoric is not effective governance.

Projection, much? Seriously, how many people other than Rubin look at Cruz and say, "Wow, he's just like President Obama"? This would be one of those "predictable talking points and hare-brained assertions" to which I previously alluded.

If I read more of Rubin's pontifications, I might know who she is pushing as the next Republican presidential nominee. Perhaps somebody who, unlike Mitt Romney, doesn't see himself as God's gift to the country and the smartest man in the room, who scurries away from his own record whenever it becomes politically inconvenient? Because Rubin doesn't seem to like those characteristics in candidates she doesn't support....

Sunday, August 18, 2013

When you're trying to find a drug or alcohol treatment center for somebody you care about, you'll likely find yourself at a disadvantage. First, the person who needs treatment may attempt to impose conditions on the treatment center you choose and, even when they sound reasonable, some of those objections may be more about "How do I stay out of treatment or find something more akin to a spa than a treatment center" than about trying to find a good fit. Second, when you call treatment centers for information about their programs, you are trusting somebody at the other end of the phone to tell you the truth. Sometimes that happens, but often it does not - you may in fact be talking to somebody who works in more of a sales capacity than an intake capacity. Also, sometimes they'll share information in good faith but the experience will turn out to be quite different. If at all possible, visit a facility and get a sense of its program and stability before writing a check. Please note, even if the center is suggested to you by a facility that has a strong reputation, you should not trust the recommendation - you need to investigate any recommended facility and, if at all possible, visit the facility and see it for yourself.

One claim that many addiction programs make, that they really shouldn't, is a claim of how many people who complete their program remain sober. First, even if accurate (and it won't be) the statistic is going to be highly misleading - if you focus on treating teenagers who smoke marijuana, you're going to have a much higher "success" rate than if you're treating IV drug users. The same is true if you're counseling people who are concerned that they might be using too much alcohol or using too many drugs, coming to you as self-referrals, as opposed to people coming out of a multi-day medical detox who are not even slightly interested in being sober. Second, the definition of sobriety used by the program may be designed to give a misleading picture of the client's sobriety - focused on the "right now". Third, as responses to patient surveys are voluntary many clients who have relapsed either won't be located or won't respond. Fourth, the questions almost never extend to subsequent treatment - the quack program doesn't care if you had four relapses, completed three IOP's and spent 90 days in Hazelden between your graduation and the present, if you're sober they'll count you as a success. Fifth, the definition of what it means to complete a program can render the statistic meaningless.

One program I saw touted an 80% success rate at five years for patients who completed its program, and while it was a good program what they didn't tell you unless you asked was that they defined their program as being five years in duration, with completion meaning that through those five years you attended weekly meetings (free, or should I say, included in the price of the program) at their facility. If you stopped attending, you didn't complete the program. If you lived in another part of the state or country and thus couldn't attend those meetings, you weren't included in the statistic.

But the claim that makes immediately skeptical of a program is when it presents as a front and center part of its marketing, "We're not a 12-step program". Let me be clear: I am not wedded to the twelve step model. Twelve step program have an interesting history, emerging out of a religious self-improvement program and being transformed into a somewhat secular model for addiction support and recovery. A lot of people have difficulty with the notion of turning their will and life over to a higher power, or with making prayer and meditation part of their daily lives, even if you can do both in a largely secular manner. But as one addiction counselor, who himself had struggled with his fit with the twelve-step model, explained to me, "I tell my clients who have difficulty with the steps that if I had something better, I would send them to it instead, but I don't." Part of that is the fact that AA groups are everywhere, while non-12-step support groups remain relatively obscure. Part of AA's success results from primacy but, whether or not its critics choose to admit it, its success depends on people voting with their feet - the addicts in long-term recovery who go back to AA year after year do so because it works for them.

Through experience, 12-step programs implemented some measures that correspond to certain aspects of addiction and recovery. For example, in active addiction the addict's impulse control diminishes - desire and action become unchecked by rational thought. Twelve step programs attempt to interpose an outside reality check on the addict - if you are craving drugs or alcohol, go to a meeting or call your sponsor. As a period of sobriety expands, the internal mechanism between impulse and action can start to rebuild itself. Similarly, the concept of "90 in 90" - doing ninety meetings in your first ninety days of recovery - is reasonably consistent with the amount of time it takes for the addict's impulse control to start to approach normal levels. The social aspect of the group can be reinforcing - you're dealing with people who have been through what you have, or worse, and they want you to succeed in your recovery. They'll also welcome you back if you relapse. The group's sayings and slogans can give you something to think about, even if you reject the larger program.

It's important to recall, however, that although treatment and therapy can incorporate aspects of the twelve-step model, twelve step programs are not therapy. They're structured peer support, coupled with a structured self-improvement program. Twelve step programs are an adjunct to treatment and, while some people achieve and maintain sobriety without any treatment or participation in 12-step or non-12-step support program, many people need the longer-term peer support and accountability. If you find a program that works for you, be it a 12-step program or one of the lesser-known non-12-step alternatives, it makes sense to take full advantage of the program. There's no reason you can't try more than one program, even at the same time, to see what works.

One of the reasons that long-term participants in 12-step programs can be dismissive of the argument, "I tried a twelve-step program and it didn't work for me," or "The twelve steps are nonsense", or "I don't see why I need to completely abstain from alcohol or substance use to be sober," is that they made those same arguments in their own early recovery. Sometimes they made those arguments for a period of years before they finally did what AA demands, surrendering themselves to the program, and that's when it worked. Again, I'm not arguing that 12-step programs can or will work for everybody, and if you're around addicts long enough you'll see unfortunate cases where a person who had achieved many years of recovery ends up relapsing despite seemingly doing everything right, but there is something to the argument that if you surrender to the program it can work for you.

The primary purpose of a marketing hook, "We're not a 12-step program", is to reach people who either are alienated by the very concept of the 12 steps, or people who find them difficult or intimidating. Were the argument intended to reach people interested in science-based recovery, it would put science front and center rather than a rejection of the twelve steps. To the extent that a recovery program can identify addicts who will or will not benefit from a particular treatment modality and channel them into programs and support groups that are likely to work for them, I'm all for it. But, as much as they may protest otherwise, when they flatly reject the 12-step model in toto they are rejecting approaches to treatment that have been documented to work for many people. If you're going to claim to offer science-based treatment of addiction the science should be front and center, not the rejection of a particular approach to treatment.

L.A. Weekly published an in-depth article about a treatment center that claims to reject the 12-step model,

I tell [a person who completed the program] that despite [the proprietor] Prentiss’ denouncements of 12-step programs, I saw residents’ schedules on the wall that indicated optional A.A. meetings.

“When I was there, we did six or seven [A.A.] meetings a week. Two or three in-house and the rest out,” he says. “And they were mandatory. When Chris wrote his book [The Alcoholism and Addiction Cure],that ended. That’s when he decided A.A. was the villain, because he decided he could make a fortune if he just claimed he had found the cure for alcoholism.”

The business executive continues in an upbeat, almost appreciative tone: “Chris has a brilliant scheme that they have cooked up there. He has the perfect sales pitch.” His voice suddenly drops. “I know. I fell into it. It’s a beautiful sales pitch when someone is at the end of their rope.”

When I tell Stuart I couldn’t find any of the success stories Prentiss brags about, he tells me, “People come in there, they fail and nobody can call him on it. He’s got clients with confidentiality agreements to hide behind.”

How did anybody at all get sober, I ask? The answer, says Stuart, is the ironic one: A.A. I remind Stuart just how adamant Prentiss was with me in mocking A.A.

“Chris was having trouble filling the beds, and the minute he changed the message, they filled to the brim. He created a cash machine,” Stuart [a person who spent $250,000 on the program] says. “After my stay in ’05, I was invited back as someone early in recovery, and I started talking of all the people I had been there with who had relapsed. And my message was, this is a great place, it’s just not gonna teach you anything about staying sober when you leave.”...

[Dr. Jason Giles, former medical director of the center] repeatedly hedges when asked to talk about Prentiss, but finally says, “The interesting part, I think, is how people are vulnerable to charlatans. I think these rehabs are modern-day quackery.”

Then he lowers his voice to a whisper and adds, “I’ve been in contact with a lot of my former patients from when I was there and the data, the data do not come anywhere near what he is quoting as his [84.4 percent] success rate.”

This came to mind when I saw an invitation to submit questions to the medical director of an addiction treatment center on the New York Times website. The center utilizes the 12-step model, so predicably the critics of the twelve-step approach appeared to denounce it. One in particular was pushing an "education program" as an alternative to treatment, sharing this link.

Outside independent professional research firms have certified a long-term success rate of at least 62% for the St. Jude’s Program. This compares to a success rate in the range of 0-20% for conventional programs.

Clearwater consulted with BRI regarding the specific information needed for fielding. Baldwin [the parent company for the education program] and Clearwater mutually agreed to have Clearwater use Microsoft Access to randomly choose names from a list provided to Clearwater by BRI. After the names were selected, Clearwater accessed BRI’s in ‐ house database containing contact information for each participant in the Jude Thaddeus Program to gather specific information that was copied manully into a spreadsheet. The contact information was loaded into our CATI system and the interviewers began to contact designated individuals and complete interviews.

It catches my attention that no claim is made that BRI provided a complete list of people who have completed the program.

Out of a total of 956 records called, 232 resulted in completed interviews with both parties, giving an overall response rate of 26.17%. Clearwater interviewers “chased” members of the sample who were not reachable at the household or telephone number provided by BRI when someone we contacted could provide us with an updated telephone number.

The low response rate should catch anybody's attention, especially given this note:

Many Guests to whom we were never able to speak with were actually back in rehabilitation again. That information was tracked in the attempt messages, but may be something that should be tracked more quantitatively using a specific disposition or answer choice.

First, it's a misnomer to say "again", given that the program being investigated is an educational program, not a therapeutic program. Second, why exclude from the claimed success rate the percentage of people who could not be surveyed because they were in treatment?

Also, the survey appeared designed to maximize the number of respondents who could claim to be sober,

Have you been sober, not using any illicit drugs or alcohol, for at least the last 30 days?

Self-reporting is a relatively poor method of evaluating sobriety. Some of the people contacted had provided a "corroborator" who was independently asked if the alumnus was sober. When reached, the corroborators indicated a lower level of sobriety than the alumni. Yet the program's official website presents a conspicuous pie graph labeled "62.5% sober for the past 23 years", a claim that they know to be at best highly misleading. As I interpret the graph they are deliberately implying that 62.5% of people who complete their program are verifiably sober after completion, when they know that's anything but the truth.

Going back to the website linked from the New York Times, the statistical argument gets worse,

This compares to a success rate in the range of 0-20% for conventional programs. Data published by Alcoholics Anonymous (A.A.) indicates that its 12 step method has a success rate of no more than 5%. Research also finds that no treatment at all has a success rate of about 30%. This suggests that traditional 12 step programs are less effective than doing nothing.

The "success rate in the range of 0-20% for conventional programs" statistic seems to have been fabricated. No source or context is provided.

In terms of the claim that AA "has a success rate of no more than 5%", if you hear that from any person or entity claiming to be an expert in either addiction treatment or 12-step programs, my suggestion is to run away. The figure being described is a one-year retention rate - how many people who start AA within a particular 12-month period continue to attend meetings. In a survey of people who are attending AA, "35 percent were sober for more than five years; 34 percent were sober from between one and five years; and 31 percent were sober for less than one year. The average time sobriety of members is more than five years." As I indicated earlier, the people who keep going back to AA (and who do the work necessary to pay for meeting space, set up the space, provide coffee, make literature available, etc.) do so because it works for them. If you have to fabricate a 95% failure rate in order to promote your program, the reflection is on your program and not on AA.

For me, the greatest injustice of all is St. Jude/BRI's CONSTANT slandering of A.A. No, not because I support A.A. (it's a religious cult, with rigid dogma and rituals and little to zero efficacy), but because....well....the St. Jude Thaddeus program IS A.A. I know, weird right? Basically, the St. Jude program is identical to the 12-steps, and its crux (and a "guests" likelihood of success) rests on willingness to "serve others". In A.A. that means make coffee, give away cigs, and **** vulnerable women. At St. Jude it means do dishes, hide candy under your roommate's pillow, and **** vulnerable women. Essentially, instructors act as sponsors who aid in a "guest's" acceptance, surrender (formal surrender prayer said with a sponsor, shit, I mean instructor) a detailing of misdeeds and character flaws, a drafting of an ammends list, and on and on. The only difference? St. Jude insists meetings are unnecessary, it's all about choice, and that after completing the "workbook" you're cured for life!! I just can't believe how much effort they put into distancing themselves from A.A. whilst simultaneously being A.A.

So again we have a program that bashes AA but reportedly adopts or utilizes many of its precepts. The alumnus recognizes the marketing aspect, "St. Jude needs A.A. to exist so they can sell their services based around NOT being A.A.". It's also surprising how some of the most vocally anti-AA treatment centers and programs seem to be owned or operated by people who have no credentials in either behavioral health or addiction treatment.

Somebody who makes a statement along the lines of, "Conventional treatment and 12-step methods of recovery don't work", is being no more true to the facts than somebody who claims "Conventional treatment and 12-step methods of recovery always work". No treatment works for all addicts all of the time, and some treatments that won't work for an addict at one state of addiction or recovery may well be effective when they've reached a different stage in their recovery (or lack thereof).

Saturday, August 17, 2013

Liberal economist and much-respected friend Dean Baker, co-director of the Center for Economic and Policy Research, where he keeps the Beat the Press blog, has appeared on PBS NewsHour often over the years, and recently on these pages in "Don't Blame the Robots." He appeared here again Wednesday, decrying what he called the media's "mindless" budget reporting.

But when he wrote on his blog on Aug. 3 that "[t]he PBS Newshour won the gold medal for journalistic malpractice on Friday (Aug. 2) by having David Brooks and Ruth Marcus tell the country what the Friday jobs report means," he seemed curiously harsh and patently partisan.

I don't think it's either, actually, save in the sense that we're supposed to tiptoe around the fact that a lot of the analysis offered by "serious" news shows revolves around talking heads who know little about the subjects that they are discussing, but get more and more air time by virtue of their past history of being talking heads, and that it's thus "curiously harsh" to note that this phenomenon represents a manifestation of the Peter Principle. Had they invited Jenny McCarthy on to discuss the science behind vaccines, I suspect that Solman would have taken issue both with the invitation and with the implication that she had special expertise. Yet that is exactly what shows like PBS Newshour do when they present as authorities non-economists who pontificate on the economy despite a long, documented history of having paid very little attention to what actual economists have to say.

"Brooks and Marcus got just about everything they said completely wrong," Baker continued. "Starting at the beginning, Brooks noted the slower than projected job growth and told listeners: 'Yes, I think there's a consensus growing both on left and right that we -- the structural problems are becoming super obvious...'"

But, Baker insisted, "It's hard to know what on earth Brooks thinks he is talking about. There is nothing close to a consensus on either the left or right that the economy's problems are structural, as opposed to a simple lack of demand (i.e. people spending money). This is shown clearly by the overwhelming support on the Federal Reserve Board for its policy of quantitative easing."

Solmon notes that Paul Krugman agreed with Baker, then observed that while Brooks and Marcus aren't in fact describing an economic consensus their argument demonstrates how "Washington conventional wisdom... has clearly swung to the view that our high unemployment is 'structural', not something that could be solved simply by boosting demand".

If I took umbrage at those statements, my first response would be to explore whether or not there was a consensus among economists as to whether the economy's problems are structural. I would also wonder why David Brooks, who occasionally takes ill-informed potshots at his New York Times colleague, Paul Krugman, is not aware of Paul Krugman's years of argument on this subject. But instead....

Look, folks, there may indeed be no "consensus growing on left and right" about the predominance of structural unemployment, as David Brooks alleged. Just look at how vigorously Krugman and Baker took the other side. But I rather doubt Krugman's assertion that there is an "actual economic consensus" on the unemployment debate that favors his cyclical explanation to the exclusion of the structural. Unless, of course, Krugman means a consensus among economists he agrees with.

Why assume anything? Why not call other economists and ask?

A confession: Brooks is a friend for whom I have great respect, as I do for Ruth Marcus.

Well, that explains it... just not in a manner I find satisfactory.

Unlike Krugman and Baker, my main job for 36 years now has been to interview not only economists like them, but hirers and hirees, firers and firees. I've done so through both recessions and recoveries alike. I wheedled soundbites out of the drearily downhearted high tech-workers of the late 1970s and spoke to the happily hopeful hires of the late 1990s.

Then, friendship or no, there's really no excuse for the assumption. Solmon did find "A 2011 paper from the San Francisco Fed attributed 60 percent of long-term unemployment to cyclicality and 40 percent to structural factors," which is at best tepid support for Brook's' assertion that the issue is structural, but that two-year-old paper seems to be the best support he could find for Brooks' claimed consensus.

I'll admit, when I looked at the unemployment data, the fact that many workers displaced by the great recession were never again going to earn the sort of wage they had previously enjoyed, and the downward pressure on the middle class, my initial reaction to "This isn't a structural issue" was "Say way?" But in fact what Krugman and Baker are discussing is something else - the notion that there has been a seismic change in the economy such that we have to simply accept a higher unemployment rate than we have historically seen. Baker, Krugman and others have rebutted that "structural change" argument repeatedly and convincingly, to the point that if you're a business and economics reporter and are only just now taking note of it it's safe to say that you've chosen not to pay attention to material you should be covering. But Solmon seems mostly interested in the issue as a left-right political debate, and thus seems to think it's enough to circle back to Brooks as an authority.

Solmon gets partial credit for allowing Dean Baker to refute the "structural" argument, but he loses points for a response in which he changes the subject,

Baker's may be the best possible summation of the cyclicalist argument. Moreover, he may well be right: throw enough money at the economy, and at some point, everyone will be employed.

But if economics teaches us anything, it's that every decision has both benefits and costs. What might be the cost of Baker's Keynesian "Trillion-Dollar Solution"?

Baker, of course, didn't argue that the only way back to full employment was a $trillion stimulus, he simply described a theoretical means by which the economy could be brought to full employment. When you introduce an idea with, "Imagine someone found a $1 trillion bill in the street and decided that, as a public service, she would spend the money over the next 12 months to boost the economy", it's pretty obvious that you're not describing something you believe is likely to occur. Solmon then speculates about how productive newly created jobs would be, an argument that is in no way tied to the present time or economy. Solmon argues,

If the cyclicalists are right, spend a trillion dollars and new jobs will eventually emerge, as they indeed regularly have throughout American (and world) history. If the structuralists are right, however, history is in the process of changing and the government jobs will last only as long as the trillion dollars.

But the discussion was about consensus, right? And Solmon has completely abandoned the pretense that the consensus described by Brooks exists on either the left of the right. Solmon closes by offering a comment from his prior thread, in which a tech graduate describes being heavily recruited, with generous wage offers and stock options,

Those opportunities, however, are out there only for those with a set of specialized skills. If the structure of the U.S. economy is changing to employ those who have such skills and disemploy those who don't, the structuralists have a point.

But again, same as it ever was. When changes in technology and the economy led to the demise of the livery stable and blacksmith's shop, even as blacksmiths and stable hands struggled to find new work, other people were entering the job market with a very different set of skills and with far better job and income prospects. When the domestic garment industry collapsed in favor of offshore production, medical school graduates were doing better than ever. The fact that wages or opportunities in one corner of the economy are reduced even as opportunities exist "for those with a set of specialized skills" is not new - it's history repeating itself.

Monday, August 12, 2013

The Red Wings want a new stadium and, despite Detroit's bankruptcy, the governor is in favor of a taxpayer subsidy for the $650 million project,

“This is a catalyst project,” Governor Rick Snyder said, according to Crain’s Detroit Business. “This is going to be where the Red Wings are. Who doesn't get fired up in Detroit about the Red Wings? Come on now, the people that are criticizing are people from outside of Michigan. This is something that is important to all of us.”

There are plenty of reasons to criticize massive government subsidies of sporting arenas, including the fact that sports owners tend to be extraordinarily rich people who can afford their own arenas - and if they're not, there's probably a richer person who will be happy to acquire the team. The subsidies have created an unhealthy market in which a team's value can be increased by tens or hundreds of millions of dollars to the owner based upon the taxpayer subsidy for a stadium. From Crain's,

Detroit's Downtown Development Authority intends to use $284.5 million in property taxes captured within its 615-acre downtown district to pay off the bonds issued by the state to build the 18,000-seat arena west of Woodward Avenue and I-75.

The remainder of the district costs, or $365.5 million, will be picked up by Olympia Development of Michigan, the property development arm of Mike and Marian Ilitch's $2 billion Detroit business empire that includes the Red Wings, Detroit Tigers and Little Caesars pizza chain.

Snynder also defends the project on the basis that it will "create 2,900 direct construction jobs" and "another 1,480 [ancillayr] construction jobs." The subsidy works out to $65,000 per job - and recall, we're talking about temporary jobs. Really, you can't justify this probject on "job creation". The American Prospect notes that some shady land deals have already been detected, with people on the inside maneuvering to profiteer.

An obscure new owner took over three low-income apartment buildings in the area targeted for development this spring. This mysterious landlord gave residents 30 days to leave. A Detroit News expose led to an extended eviction deadline, and then no eviction at all—but not until after many residents had already left. Following the press conference on the arena, the newspaper wrote that, “Since 2012, The Detroit News has reported on a series of mysterious land deals in the Cass Corridor—mainly involving blighted properties. Although it was widely speculated that the property was being amassed for an arena project, the deals have been cloaked in secrecy, with sellers signing confidentiality agreements and buyers not revealing themselves through public documents. The buyers in the land deals, (it was) revealed Wednesday, have been ‘a mix’ of city and Ilitch Holdings.” (Illitch Holdings is affiliated with Olympia Development).

Obviously, work needs to be done to keep that sort of thing to a minimum. It's painful to see Ilitch's fingerprints on that deal, through his companies, given that he's already the primary beneficiary of this subsidy of the new sports arena.

This isn't the worst example of government subsidy that I've seen. Detroit needs something to help drive investment and to bring more people to the city. But for the state as a whole, and Detroit's not the only troubled area, the governor's arguments also applies to subsidies to the film industry. The movie subsidies that were initiated toward the end of the Granholm Adminisration brought a lot of money, energy and excitement to local communties, created a number of temporary jobs, had the prospect of creating some permanent jobs, and seemed to be doing at least as good of a job of promoting Michigan's attractions than the much ballyhooed "Pure Michigan" ad campaign. The Governor's cuts of subsidies to the film industry, and subsequent equivocating over how much to extend, have dramatically reduced the interest of the film industry in Michigan while creating a climate of uncertainty that is likely to cause the industry to choose other states with more consistent, reliable approaches to the industry. The larger subsidies of the Granholm era seemed poised to help establish permanent movie facilities and jobs in the state, while Snyder's approach undermined local ventures and thus has resulted in at best temporary jobs with the remaining subsidies largely flowing out of the state. It may have been possible to reduce the Granholm-era subsidies while retaining the local benefit, but that opportunity seems to have passed.

As with sports teams, whether we like it or not, significant subsidies are part of how the movie game is played. I don't mind people taking the philosophical stance that you shouldn't subsidize the entertainment industry - and even less the profitable entertainment ventures that could and would continue to operate without subsidies - or, for that matter, profitable companies that want huge tax breaks and subsidies to open a new factory, server farm, headquarters, or other facility in your state. But once you decide you're going to offer subsidies, it makes sense to try to apply a consistent, predictable approach to those subsidies - both in terms of who will qualify and how much you will budget for subsidies in any given year.

Obama concedes that Snowden's leaks triggered a passionate and welcome debate. But he claims that Snowden is no patriot because "we would have gotten to the same place" eventually.

When?

This does not pass the bullshit test.

For the most part, I did not find Snowden's revelations to be surprising. They're an evolution of the ideas the Bush Administration attempted to implement before the ink was even dry on the USA Patriot Act, and although those ideas evolved to be more consistent with the law it was also inevitable that they would test the limits of the Fourth Amendment and rely heavily on the fact that the federal courts are incredibly receptive to a defense of government actions that, in essence, is "But... National security!" It was also no surprise that Congress knew what was going on (or at least enough key leaders of both parties that neither has any credibility in arguing that the Obama Administration was exceeding the bounds of the law) as Congress habitually eschews its duties when it hears the words "National security". Darrell Issa and his ilk are more than happy to squawk about national security errors and failures, but they are too craven to do anything that might make themselves the subject of such finger-pointing. They are happy to refrain from setting limits or staking out the margins. Better yet, the failure to do their own jobs allows them to do even more finger-pointing.

I have no particular objection to the notion of Edward Snowden as a whistleblower in the vein of Daniel Ellsberg, to the point that he disclosed a government program that exceeded the bounds of what he believed to be reasonable and lawful, grabbed enough supporting documentation to prove his allegations in the event that they were denied, and stood ready to accept whatever consequence fell upon him for his actions. I have a problem with Snowden because it seems like he did a Bradely Manning-style document dump and, while not disclosing those documents in the same manner as Manning, has reportedly distributed encrypted files with a key to be distributed if something happens to him... or, I suppose, if he feels like distributing the key.

I also have a problem with his fleeing to a nation with an abysmal human rights record. If your concern is that the U.S. is becoming too much of a police state, the idea of seeking refuge in Russia should seem appalling.

I would have much more sympathy for Snowden had he purged his document collection of anything that might compromise national security, and anything else not necessary to support his claims about the overreach of his program, then sought temporary refuge in a nation like the U.K. while using the attendant publicity and extradition process to make clear that his intentions were purely honorable - to reveal what he believed to be government misconduct while keeping only those documents absolutely necessary to prove the overreach at no risk to national security and with no intention of sharing those documents except as necessary to support his claims. Then he could say, "I realize that I could go to prison for this, but if it makes my country start doing the right thing it's worth it."

Snowden's own past statements cast something of a shadow over his motives, but part of the problem seems to be that he has fallen in with the wrong crowd. The people who encouraged him to create his "failsafe" and to flee to Russia, I think, were doing so as part of their own agenda - with Snowden becoming a useful tool for them to use in advancing their own public profiles and agenda. His actions have made his personal story and motives the primary subject of public debate, while allowing the government to take the most hardline approach toward his prosecution.

Had Snowden fled to the U.K. and not made a sufficiently convincing pubic case for his actions - and perhaps even if he made a convincing public case - he may well have found himself in prison. But as his primary motivation at this point seems to be to avoid prosecution, his actions continue to subvert the conversation that his supporters content he wants, and that people like DeLong correctly note that we need. As long as he stays in Russia, the less likely it is that the conversation will switch from Snowden's life as a fugitive to the scope of the continuing surveillance programs he revealed.

Sunday, August 11, 2013

Nicholas Kristof makes a cogent argument against mandatory minimum sentences - particularly the really big ones that don't allow for much (if any) judicial discretion - but his depiction of the case casts an unfortunate shadow over his argument. Under investigation for burglary, a man was found to have seven shotgun shells and, even though burglary charges were dropped, is looking at a fifteen year minimum sentence in federal prison.

Then a neighbor died, and his widow, Neva Mumpower, asked Young to help sell her husband’s belongings. He later found, mixed in among them, seven shotgun shells, and he put them aside so that his children wouldn’t find them.

“He was trying to help me out,” Mumpower told me. “My husband was a pack rat, and I was trying to clear things out.”

But in late September 2011, he went off track. He stole tools, tires and weightlifting equipment from vehicles and a business warehouse. He even had his son with him on one trip, which added a separate charge.

A video camera recorded the burglaries.

Kristof may be correct that for most of his marriage, on the whole the man was a good father, but when you take your child along on a burglary you take yourself out of the running for father of the year.

The state charges appear to have been dismissed not because the state couldn't prove them, but because it's a waste of resources to prosecute somebody for burglary when his state court sentence won't be as long as the federal sentence he's already received. But for the federal conviction, given the strength of the described prosecution case, it's a safe bet that the man would have spent a number of years in state prison. Having taken a quick look at that state's statutes, his sentence in state court appears likely to have been significantly less than his federal sentence, but (without any argument in favor of the laws) it's also fair to note that under other states' burglary laws and habitual offender laws he would have been looking at a sentence at least as long, and potentially longer.

Kristof is correct to point out that long sentences resulting from "mandatory minimums" and habitual offender laws often do represent a very poor use of money and resources, it's difficult to believe he couldn't find a better case to illustrate his point. This is important, because criminal law is one of the fields in which the saying, "Bad facts make bad law" tends to hold particularly true. When you omit important facts to make a defendant seem more sympathetic, you don't just risk a negative reaction when people learn the full facts, you risk worsening an already hostile climate for reform efforts. As Kristof notes, mass incarceration has correlated with a reduction in crime - and while I don't want to read too much into that correlation, as I think the causative element is weak, it is fair to say that a small number of criminals are responsible for a disproportionately large portion of the crime in any given community, and some of them only stop committing crime while they are incapacitated by incarceration.

I don't like this argument, either:

Conservatives often argue that there is a link between family breakdown and cycles of poverty. They’re right: Boys are more likely to get into trouble without a dad at home, and we have a major problem with the irresponsibility of young men who conceive babies but don’t raise them.

Juvenile crime is associated with factors such as domestic violence, alcoholism and drug use in the household, antisocial behavior by a parent, and marital discord. In some households, removing the father will significantly reduce the risk of the children's following in his footsteps. The case Kristof cites involves a father who was not only committing burglaries, but who took one of his children along when committing one of his crimes. The particular argument Kristof makes, that putting fathers in prison leads to their kids being more likely to engage in crime, misses the very important influence that fathers have through their actions. Sometimes it's the father's presence, limited though it may have been, that put the child on the wrong path. As for the men who aren't in prison "who conceive babies but don’t raise them", that's an editorial for another day.

The classic caricature of justice run amok is Inspector Javert in Victor Hugo’s novel “Les Misérables,” pursuing Jean Valjean for stealing bread for hungry children. In that case, Valjean knew that he was breaking the law; Edward Young had no idea.

For the shotgun shells, I can accept that argument. For the burglaries that led to the discovery of the shells, not so much.

I do hope that the man's sentence is shortened, because I don't think that there's much to gain in terms of rehabilitation, just retribution or deterrence in a 15-year sentence. Might the long sentence prevent him from committing more crimes? Certainly, and the man has a record that makes the possibility of additional burglaries a valid concern, but you have to look at costs and benefits, and the law of diminishing returns. This case is not unique - we've been hearing about the results of "three strikes"-type laws since they were first enacted, and some states have rolled back a number of mandatory minimums (sometimes not enough, but it's a start) or revisited the way habitual offenders are sentenced.

Many Democrats are hungry to make history again, and they see the first woman president as the natural successor to the first black president.

Got any names? Even one?

Not that she made the argument, but Dowd's assertion reminds me of the race-baiting argument that Democrats only voted for President Obama "because he's black". Now the notion is that, coming off of that "high", Democrats are going to vote for a woman because... she's a woman? Maybe I'm missing something, but wasn't Hillary Clinton a woman the last time she ran? Is there an official Democratic checklist that is out there somewhere? Are Democrats working their way through the Bill of Rights... "African Americans were enfranchised first, then women, and, aw shoot, you have to be 35 to be President and the next item on the list is an 18-year-old"? Why didn't Democrats rally to support Carol Moseley Braun's run in 2004 - she would have been a twofer!

Friday, August 09, 2013

"I'm just a soul whose intentions are good...."
The concept behind factchecking websites is reasonable - politicians say things that may or may not be true, and the media does a poor job distinguishing truth from fiction, so why not have an independent agency or reporter assigned to "fact check" prominent claims and then rate their accuracy? The reality has largely failed to live up to the dream. As I noted during the past presidential campaign,

A while back I took part of an online quiz on a "fact checking" site, in which they asked readers to estimate how many... Pinocchios, flaming butt cheeks, or something like that... they assigned to various statements by politicians. The pointlessness of the exercise was best illustrated by the rating of a statement by Rick Santorum as being mostly false. The statement was one of opinion. Had the scale been the "Chauncey Gardner" garden rake scale, the person doing the rating would have been free to editorialize that the comment was so dim-witted and disconnected with logic that it ranked as a "hit in the face with a garden rake so hard that your zombie head gets knocked off", that would be fine. One opinion against another. Even if the rationale is, "That's such a baseless opinion that I can't believe Santorum holds it," it remains your opinion that he's lying as opposed to being ignorant or obtuse.

When self-professed fact-checkers stop checking the facts and start assessing the degree to which a politician may be shading the truth, they're no longer engaged in fact-checking. It's a perfectly legitimate function of the press to point to a statement that neatly avoids key issues or problems and to point out that it's not the whole story, but that's a different tasks than fact-checkers claim to be performing. It's interesting to me, also, that fact-checkers will use "Pinocchio" scales or a "pants on fire" meter, but they shy away from actually using the term "lie". You don't have to bring it out for every nuanced statement, but when a politician tells a real whopper why not tell it like it is? Instead, we have gasbag commentators who don't hesitate to call up down and the truth a lie, when they're talking about the other side, while the mainstream media at times passively "reports" on the controversy.

I occasionally follow a link to a "fact check" page, usually offered by one partisan or another to back up their claim that the other side said something that was false or misleading. Sometimes the analysis is helpful. Sometimes the effort to find truth in a false statement is a bit ridiculous. But for the most part the ratings are highly misleading to casual readers, and the "fact checkers" have largely reduced themselves to being a tool to advance political mendacity. Could factcheckers change that status quo? Yes, but it would be hard work and would probably necessitate their abandoning their simplistic rating tools, so I don't see it happening.

It’s tempting to throw up one’s hands and say there’s no role for the factcheckers to play on questions like [whether the Ryan Plan would "end" Medicare]. As Sargent argued at the time, “this disagreement ultimately comes down to differing interpretations of known facts—and not to a difference over the facts themselves.” At New York, Jonathan Chait ran through the proposed changes and then asked, “Is that ‘ending Medicare?’ Well, it’s a matter of opinion.”

That’s the wrong word, though, just as “opinion” is the wrong word for a lot of the deeply reported work that appears on the Op-Ed page. To say the Who are better than the Stones is an opinion. To say the Ryan budget wouldn’t “end” Medicare—and that it’s dishonest to claim it would—is a factual argument. (PolitiFact founder Bill Adair says the site practices “reported conclusion” journalism.)

PolitiFact, I think quite deliberately, chose to make a valid opinion about the Ryan plan its "lie of the year" because it knew that it would gain lots of attention. But it's like the Santorum comment that one fact check or another deemed a "lie" - you can't so easily brand an opinion as a "lie", let alone "lie of the year". To the extent that you offer a defense of your position by parsing through the facts, and even if you paint a clear picture of why you believe that the opinion is incorrect, very few people are going to read that explanation. They're instead going to hear politician and hacks use the "lie of the year" designation for purposes of demagoguery.

Having spent quite a few years of my youth in Canada, which has a national, single-payer Medicare system, it's not difficult to see the direct comparison between Canada's Medicare and the similarly named U.S. program - which is a national, single-payer insurance plan, limited in enrollment to the elderly and certain disabled persons. If you were to approach a Canadian and say, "If the Harper Government were to change Medicare so that rather than getting health insurance you received an allotment of money that you could use to buy insurance, and rather than having one government-run health insurance program you would choose between an assortment of private carriers, would it be fair to say that he's 'ending' Medicare", I think most people would say "Yes". If you added, "What if the government were still offering a state-run health insurance plan that you could select from in addition to the private plans," perhaps you would get a bit of head scratching - but if people realized that the net effect would be to cause the cost of the state-run plan to soar as it ended up insuring the sickest members of the population, I expect that most would again answer "Yes". Whether or not you believe I am correct in my estimate of the public's response, anybody saying "Yes" would be sharing a fair, fact-based opinion. Part of the outrage against the "lie of the year" label was that many people agree completely, in good faith and with the support of the facts, that Ryan's voucher plan (even as amended to allow Medicare to continue to exist in competition with the private plans) would end Medicare "as we know it" - primarily preserving the name, while dramatically changing and undermining the program. So PolitiFact was not only calling the politicians who took that position "liars", it applied that brand to tens of millions of of people who hold that fact-based, good faith position.

Here’s the logic: If Ryan’s privatization plan ends Medicare, what would we say of a proposal that actually ended it? Of course a scheme to give seniors two free aspirin a year and call it Medicare would count as killing the program, as Chait mused; but does everything short of that fall into some hazy, undifferentiated sphere of personal opinion?

I don't think it's necessary to regard everything between the two extremes as "hazy" - just as opinion. And you can argue that one set of opinions hews closer to the fact than another, but they remain opinions. If you view Medicare as a plan that allows for comprehensive health care coverage to seniors, it's more than fair to observe that the Ryan plan was designed to undermine the comprehensive nature of the coverage. Were it otherwise, Ryan could have proposed exactly the same plan but with one change: that every private insurer that participated in the plan had to start by offering the same coverage as Medicare, and that they would compete for customers by offering additional services for the same or a higher price or by offering the same services at a lower price. Ryan would never propose such a plan, because he has absolutely no faith in private insurers to be able to compete at that level. As Medicare Advantage indicates, when private insurers try to compete with Medicare they require subsidies. Why? Because even if they can do everything else as well or better than Medicare, they need to extract profits.

The factcheckers do issue some rulings that don’t provoke much disagreement. In these cases, questions of legitimacy fade into the background. This may happen much less often than we would like to think, though, and it’s a litmus test that political actors can easily game. To apply it too rigidly—to say these are the only questions factcheckers should rule on—would provide a powerful shield for politicians’ most misleading claims.

Sure, but if a tree falls in the woods and nobody is there to hear it.... what does fact-checking contribute when pretty much everybody already agrees that a statement is false? If legitimacy is in the background, and you find only the controversial or inept "fact checks" in the foreground, what's the net contribution to the public debate?

More to the point, this is the wrong litmus test for a journalism that very deliberately rejects the “he said, she said” formulations that sustain the “View from Nowhere.” We can’t ask journalists to make the judgment that torture is torture—in the face of the rhetorical, political and legal apparatus that has been erected to redefine that word—and then also insist that they stick to pure “reporting.”

Did PolitiFact every "fact check" whether or not waterboarding is torture? This is the closest thing I could find, which holds that McCain correctly stated that water boarding had been historically prosecuted as a war crime, without actually taking a stance on whether it either should be described as torture or presently constitutes a war crime. If the defense of factcheckers is that they are free to fact check the definition of "torture", while "pure" reporters are ostensibly limited to telling us why the people ordering water boarding say that it does not constitute torture, they seem to be sleeping on the job. They may have a perspective, but neither shying away from controversies such as the Bush Administration's reinvention of what constitutes "torture" nor displaying indignation over matters of opinion do much to move us away from "the view from nowhere".

If, at the end of the day, factcheckers contribute little more to the public debate than editorials with eye-catching graphics and a score at the top of the page, they offer little that we can't already learn from the editorial and Op/Ed pages. And if the editorial content is risible, it doesn't even offer that much... save, perhaps as compared to the Wall Street Journal. Do they sometimes offer more, with the deeper, more nuanced exploration of the facts underlying their conclusions? Certainly - but, as exemplified by the Medicare fiasco, when fact checking is most important to political partisans the rating acts as noise that drowns out the signal. If you want to improve journalism, the place to start is with the larger enterprise of journalism. Factcheckers don't seem to be doing a good job of helping journalism find a better perspective than "the view from nowhere", and if they're relevance is in being controversial then that more than anything else is apt to drive their ratings.

At a hearing on Friday, the department will argue that its plan to remedy Apple’s misconduct will “restore lost competition.” In a narrow sense it may, but the problem with this case all along was that the department ignored the potentially bigger anticompetitive force in the e-book market — Amazon — while focusing on Apple.

Due to the timing of its entry into the market, its dominance as an Internet bookseller, and a pricing strategy that often involved selling eBooks below cost - something Amazon doesn't appear to in other markets - Amazon managed to gain 90% of the eBook market, and was thus fairly categorized as a monopoly. The Times suggests that it was Apple's agency contracts and price matching requirements that got it into trouble, although it was the court's finding that Apple played a vertical role in an otherwise horizontal price fixing conspiracy between publishing houses that actually resulted in the antitrust finding. Apple will certainly challenge the theory of its liability on appeal, as traditionally the only vertical participants accused in such conspiracies were major participants in the market, while Apple was merely considering entering the market - and quite reasonably would likely have declined to do so had it not been able to break Amazon's pricing stranglehold such that its eBook operations could actually be profitable. Also, the government's theory focused on the "most favored nation" clause of the contract (allowing Apple to match in its bookstore the lowest price offered by its competitors), despite the fact that such clauses are not uncommon and appear to have never before been found to form the basis of an antitrust violation.

The editorial speaks of the Justice Departments proposal as being about "keep[ing] Apple from getting back to its old tricks", but in context Apple would be a one-trick pony. The controversy over agency pricing extends to the book market only because of the way Apple entered the market. The agency model, which is Apple's consistent "trick" is otherwise a perfectly legal, appropriate business model. The Times notes that the danger of penalizing Apple in this context is that the net effect may be to restore Amazon's monopoly:

[The Justice Department plan] does not address the need for a counterweight to Amazon’s dominance. Amazon controls an estimated 65 percent of the market, with Apple at 10 percent and other retailers splitting the rest. (Before Apple started selling e-books, Amazon had 90 percent.) The case against Apple has done nothing to solve that problem.

On one hand, the purpose of the plan is to punish Apple for its misconduct, and to prevent recurrence. To my eye, the plan is absurd and overreaching, but perhaps the DOJ is following the principle that you won't get what you don't ask for, or the fact that they'll almost certainly get less than they propose so why not start by shooting for the moon? But on the other hand, if the proposal ends up restoring Amazon's monopoly - and the relief requested by the DOJ would prevent Apple from entering into any contracts that would enable it to run a profitable eBook store once Amazon, shielded by the terms of the proposal, starts once again selling eBooks at a loss - the DOJ looks a bit ridiculous. Coming down like a sledgehammer on a company that broke a monopoly by establishing an even playing field for eBook vendors, in order to protect and restore the company whose monopolistic practices had previously deterred any appreciable competition.

Following the settlements with the various publishing houses involved in the conspiracy, the market has effectively sorted itself out. Amazon still controls a whopping 60% of the eBook market, prices have stabilized, and consumers have their choice of platforms and vendors. I thus think that the remedy should focus on prevention and punishment, not on trying to tamper with the markets. If the DOJ's concern is that Apple is going to profit unreasonably from its conduct over the next few years, and it can prove that theory, increase the fine accordingly. Sure, it may be that the DOJ's plan will take us back to the days when Amazon sold many eBooks as a loss to deter competition, but even if I believed prices would be lower I think we're far better off over the long-run if Amazon's monopoly is not restored.

Tuesday, August 06, 2013

Based on the math, it is hard to justify a $250 million valuation for The Washington Post. The company reported it lost nearly $50 million for the first half of the year on its newspaper operation that generated $138.4 million in revenue. Of the $50 million loss, nearly $40 million was a noncash pension expense. So you could argue that the company lost only $10 million on operations. But it lost $33 million in the first half of 2012, too, also including pension costs. Circulation fell about 7 percent in the first half of 2013.